Col Gaddafi's forces have rejected a ceasefire call from Libyan rebels, saying
government troops would not leave Libyan cities as demanded by the
opposition.

"They are asking us to withdraw from our own cities. .... If this is not mad then I don't know what this is. We will not leave out cities," said Mussa Ibrahim, the government spokesman.

Rebels had earlier called for the ceasefire after Gaddafi forces drove them back for a third day after sandstorms and clouds hindered Nato air strikes.

Mustafa Abdel Jalil, head of the rebel Interim National Council, said in a televised press conference that Gaddafi's fighters should retreat from western cities and built-up areas as part of a ceasefire deal. There was no immediate response to the offer from the Gaddafi regime.

The ceasefire was proposed after Admiral Mike Mullen, the chairman of the Joint Chiefs of Staff, said that American jets would not fly with Nato forces over Libya after Saturday leaving the remainder of the Nato forces to provide the air power.

The US had committed 90 aircraft to the Libyan missions. Their withdrawal leaves the remaining coalition forces, including Qatar, UAE and Sweden with 143 aircraft. Britain has 17 aircraft in operation and France has 33.

Robert Gates, the Pentagon chief, told Congress the US would "significantly ramp down our commitment" to Libya apart from for electronic warfare, aerial refuelling and surveillance.

Mr Gates and Adml Mullen faced strong scepticism on Capitol Hill. "With Iraq and Afghanistan already occupying a considerable share of American resources, I sincerely hope that this is not the start of a third elongated conflict, especially in a region where we have other more discernible strategic interests," said Representative. Buck McKeon, chairman of the House Armed Services committee.

He stated that "hope is not a strategy" and that the US had "effectively stopped our strike missions altogether without having achieved our goal", which he believed was to force out Col Gaddafi.

"I know the US military has a heavy load on its back right now ... but we must not fail in Libya, and I say this with someone who is familiar with the consequences of a lost conflict [in Vietnam]".

Mr Gates told Mr McCain and his colleagues that American strike aircraft were on "standby" in case it became "apparent" that Nato coalition aircraft were not succeeding.

A Nato official conceded that clouds had affected the air strikes and made it more difficult to hit Gaddafi forces. "Yesterday, we were somewhat restricted by bad weather. There is no doubt it will be more challenging for us to identify targets of military forces that are attacking civilians."

A coalition air strike reportedly killed seven civilians and injured 25 injured, according to a doctor working with rebel forces.

Dr Suleiman Refardi said that the incident happened on Wednesday in the village of Zawia el Argobe, near Brega, when the air strike hit an ammunition truck in a pro-Gaddafi convoy and damaged two houses. According to the doctor, the dead were four girls aged between 12 and 16 and three youths aged between 14 and 20.

The doctor said that villagers considered the casualties a "sacrifice and a price worth paying" for stopping Colonel Muammar Gaddafi's troops from taking back rebel-held territory. Zawia el Argobe is nine miles from Brega, where rebels forces are massed.

Nato officials said that they were making inquiries "down our operations chain to find out if indeed there is any information on the operation side that would support this claim".